Business plan

V

STANDOFF E XPLOSIVES D ETECTION S YSTEMS
(SEDS)

S TRATEGIC B USINESS P LAN

2008
Wayne B. Norris, CEO

BOSSGOV Inc.
300 Maple Park Blvd. Suite 301
St. Clair Shore, Michigan 48081
Phone 586-443-2000  Fax 586-443-2049

Standoff Explosives Detection Systems Strategic Business Plan

Table of Contents
1. EXECUTIVE SUMMARY........................................................................................................................3
THE COMPANY................................................................................................................................................3
THE COMPANY’S MISSION.................................................................................................................................3
PRODUCTS AND SERVICES..................................................................................................................................3
MARKETING AND SALES STRATEGY....................................................................................................................4
THE COMPETITION............................................................................................................................................4
TARGET MARKET.............................................................................................................................................4
MANAGEMENT.................................................................................................................................................5
OPERATIONS....................................................................................................................................................5
STAGE OF DEVELOPMENT..................................................................................................................................6
FINANCIALS.....................................................................................................................................................6
FUNDS SOUGHT AND UTILIZATION......................................................................................................................6
2. COMPANY DESCRIPTION....................................................................................................................7
THE COMPANY MISSION...................................................................................................................................7
PRODUCTS AND SERVICES..................................................................................................................................7
3. INDUSTRY ANALYSIS AND TRENDS.................................................................................................9
BACKGROUND..................................................................................................................................................9
EXISTING COUNTER-IED MEASURES................................................................................................................10
THE COUNTER-IED INDUSTRY........................................................................................................................10
INDUSTRY TRENDS..........................................................................................................................................12
SOURCES:......................................................................................................................................................13
4. TARGET MARKET................................................................................................................................14
MARKET DESCRIPTION....................................................................................................................................14
MARKET SIZE AND TRENDS.............................................................................................................................14
5. COMPETITION.......................................................................................................................................16
THE CURRENT PICTURE...................................................................................................................................16
BARRIERS TO COMPETITION.............................................................................................................................17
6. STRATEGIC POSITION AND RISK ASSESSMENT........................................................................18
COMPANY STRENGTHS....................................................................................................................................18
MARKET OPPORTUNITIES.................................................................................................................................19
RISK ASSESSMENT..........................................................................................................................................20
7. MARKETING PLAN AND SALES STRATEGY................................................................................21
8. MANAGEMENT AND ORGANIZATION...........................................................................................22
OPERATIONS..................................................................................................................................................22
PERSONNEL PLAN...........................................................................................................................................22
9. DEVELOPMENT, MILESTONES, AND EXIT PLAN.......................................................................24
DEVELOPMENTAL TIMEFRAME..........................................................................................................................24
MILESTONES..................................................................................................................................................25
EXIT STRATEGY.............................................................................................................................................25

Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 2


1. Executive Summary

The Company
SEDS (Standoff Explosives Detection Systems) is a technology startup company
involved in the on-going design and development of a counter-IED solution for
military applications. The Company plans to utilize its proprietary knowledge of
applied thermal neutron beam technologies to create a system that will be
capable of detecting Improvised Explosive Devices (IEDs) from a safe (“standoff”)
distance. Once detected, the IED can then be disabled or destroyed before
causing any harm. SEDS has completed a number of successful preliminary lab
experiments at the Department of Defense’s (DOE) Oak Ridge National
Laboratories. The results of these lab experiments are highly sensitive, but the
Company is satisfied that these tests accurately reflect the underlying capability
of its future technology in addressing this critical mission. SEDS is a fully owned
subsidiary of BOSSgov, a technology solutions firm in St. Clair Shore, Michigan.

The Company’s Mission
SEDS’ views its mission as reducing human casualties and suffering by
successfully producing a counter-IED system capable of detecting the presence
of an explosive device from a safe distance. The Company plans to pursue
opportunities to manufacture and support counter-IED systems and derivative
products for U.S. and allied military forces as well as non-governmental security
customers. SEDS is currently involved in discussions with the Joint IED Defeat
Organization ("JIEDDO") – an organization established by the Pentagon to
specifically oversee and promote the development of viable counter-IED
solutions.

Products and Services
SEDS has successfully developed a core technology with the tested ability to
detect IEDs from a standoff distance and is subsequently preparing to build its
“Sauron System” prototype. The Sauron System will be based on the
contemporary application of a 50 year old proven technology known as Thermal
Neutron Activation Analysis (TNAA). In basic terms, TNAA involves bombarding
a specific target with neutrons and scientifically interpreting the results. Since
all explosives contain detectable levels of nitrogen, TNAA technology can be
configured to help identify the presence of IEDs from a safe distance. The
projected target price for each counter-IED device is projected to be



approximately $1 million with a 40% gross profit margin. Over the system’s
design life, subsidiary sources of revenue, including service, upgrades, training,
and customization are expected to increase revenues by 100% to 300%.

Marketing and Sales Strategy
The actual process of selling militarized products and services to the
Department of Defense is relatively well established. However, to assist in this
process, the Company has developed several key contacts within the military
and in the Congress. In addition, SEDS also uses a number of large lobbying
firms in Washington, DC to develop an effective long-term strategy for doing
business with the U.S. military. Most importantly, the Company has been
working closely with officials at the Pentagon’s Joint IED Defeat Organization
("JIEDDO") – an organization that was specifically created to promote and
streamline the commercial development of viable counter-IED solutions.

The Competition
IEDs are currently the number one killer of U.S. troops in Iraq and Afghanistan.
Worldwide, more than 21,000 U.S. troops have been killed by IEDs.
Consequently, the search for a viable counter-IED solution has now become a
global preoccupation. Yet in spite of the widespread effort, no one has been
able to develop a dependable method for detecting and disabling IEDs.
Nevertheless, there are currently dozens of military R&D firms, niche technology
companies, and top-tier defense contractors searching for a solution. The
following defense companies continue to work closely with the U.S. military in
the development of counter-IED related products:
 Lockheed Martin
 Boeing
 Northrop Grumman
 General Dynamics
 BAE Systems
 Foster Miller (and subsidiaries)
 L3 Communications (and subsidiaries)
 Raytheon

Target Market
The principal U.S. market for manufactured counter-IED solutions is the U.S.
Department of Defense (DoD) and the branches of the U.S. military. In 2004, the
Pentagon formed the Joint IED Defeat Organization (JIEDDO) to help jumpstart



the development of effective IED countermeasures. The JIEDDO works closely
with national laboratories, the Department of Energy, defense contractors, and
academia. Potential counter-IED technologies are frequently tested at the U.S.
Army’s National Training Center at Fort Irwin, California. The technologies being
evaluated include electronic jammers, radars, X-ray equipment, robotic
explosive ordnance disposal equipment, physical security devices, and armor for
vehicles and personnel.

Management
SEDS’ current management team consists of a talented and seasoned group of
scientists, physicists, and military technology specialists. As the Company
achieves its key technological objectives, it plans to bolster its managerial
capabilities with manufacturing and business development expertise. The
Company is actively developing the professional ties and operational discipline
it needs to ensure that its technology is thoroughly tested, carefully evaluated,
and is in accordance with the specific requirements of the Joint IED Defeat
Organization. The current SEDS team includes:

 BOSSgov Team and Consultants
 Martin Tibbitts – Chairman
 Wayne B. Norris – Principal Investigator
 Dr. Ken Ricci, Ph.D. – Consulting nuclear physicist (subcontracted
from LaunchPoint Technologies)
 Dr. Nathan Bramall. Ph.D. – Consulting nuclear physicist and data
acquisition/device driver software consultant
 Greg Pepus – Consultant

 Oak Ridge National Laboratories Staff
 Dr. Chuck Alexander, Ph.D. – Senior Scientist, Californium User
Facility for Neutron Science

Operations
In October, 2007, SEDS opened its lab in California to start building a prototype
counter-IED system (called the Sauron System). The fully-equipped laboratory
will be used for system design, testing, and assembly-related activities.



Stage of Development
In 2006, BOSSgov applied for a comprehensive 75-claim patent to protect its
underlying technology and unique design. In March 2007, the SEDS team
completed a series of successful preliminary lab experiments at the Department
of Defense’s Oak Ridge National Laboratories.

SEDS seeks $3.3 million in first-round funding to carry it to the prototype
phase. Once it has produced its prototype, SEDS expects to secure JIEDDO funds
to produce the first production unit. In September, they visited JIEDDO (the Joint
IED Defeat Organization) to present their preliminary findings. The response
from JIEDDO was exceptionally positive and encouraging. In October 2007, SEDS
opened its lab in California to begin building the prototype. SEDS believes that it
can build a preliminary prototype within 6 months and a first production unit
within 20 months. The Company’s developmental timeframe and associated
costs are shown below:

Developmental Stage Duration Anticipated Cost
Proof of Concept 120 days $800,000
Prototype (Sauron System) 180 days $2.5 million
Production Unit 240 days $5 million

Financials
The financial strategy of SEDS emphasizes the reinvestment of income for
growth during the first few years of operation, with the company reaching
profitability by year three. Annual revenue projections are summarized in the
table below:

Year 2008 2009 2010 2011 2012
Units Sold* 2 10 25 40 75
Price per Unit $1.5 million $1.5 million $1.25 million $1 million $0.75 million
Gross Revenue $3 million $15 million $3.25 million $40 million $56.25 million
Gross Margin $1.2 million $6 million $12.5 million $16 million $22.5 million
Net Profit $0.6 million $3 million $6.25 million $8 million $11.25 million

* 2008 units will be pre-commercial prototypes

Funds Sought and Utilization
SEDS seeks $3.3 million in first-round funding to complete its Sauron System
prototype. With a demonstrable prototype, SEDS expects to secure JIEDDO funds
to produce the Company’s first production unit.



2. Company Description
Standoff Explosives Detection Systems (SEDS) is a fully owned subsidiary of
BOSSgov. SEDS has designed a technically-innovative system that is capable of
detecting IEDs (Improvised Explosive Devices) from a safe (standoff) distance.
SEDS plans to use this technology to create a demonstrable prototype known as
the “Sauron System”. The Sauron System will be used to demonstrate the
Company’s technology and fund the development of its first production unit.
This will enable the Company to begin the full-scale development, sales, and
support of commercialized standoff counter-IED systems.

The Company Mission
SEDS’ overriding goal is to produce the world’s first counter-IED system
that is capable of reducing human casualties and suffering by successfully
detecting the presence of an explosive device from a safe distance. To
achieve this objective, the Company is in the process of developing a
cutting-edge solution that is based on proven technologies, innovative
designs, rigorous testing, and extensive field trials.

The Company’s principal design objective is to develop a vehicle-mounted
production unit that can detect nitrogen-containing IEDs, explosively formed
penetrators (EFPs), and truck bombs, from a distance of up to 20 meters, in less
than one second (see diagram on next page). In terms of its key business
development goals, SEDS is looking for a successful prototype and subsequent
profitability within the next three years. In addition to selling counter-IED
systems, SEDS’ business model also includes product maintenance services,
system upgrades, customization, and training.

Products and Services
SEDS has successfully developed a technology with the tested ability to detect
IEDs from a standoff distance and is in the process of preparing to build its
“Sauron System” prototype. The Sauron System will primarily be based on the
innovative application of a 50 year old proven technology known as Thermal
Neutron Activation Analysis (TNAA). In basic terms, TNAA involves bombarding
a specific target with neutrons and scientifically interpreting the results

For a short time, TNAA technology was the focus of considerable interest within
the counter-IED technology sector. However, it was ultimately put on the back-
burner by the incumbent contractor community because of the apparent



difficulty in achieving adequately large thermal neutron fluxes and precise
gamma ray detection capabilities – the technical requirements associated with
its potential value. Fortunately, neutron source and gamma ray detection
technologies have begun to mature significantly during the last few years. In
particular, technological advances are beginning to improve the value and
practicality of using TNAA. At the same time, increased interest and greater
competition has begun to lower the cost of acquiring and operating TNAA-
based devices. For these (and other) reasons, TNAA technology clearly
represents the key to the successful detection of nitrogen-containing IEDs from
a safe distance. Accordingly, the Company’s counter-IED system will rely on two
key components:
1. An azimuthally scanning (bi-directional) thermal neutron source that is
capable of emitting a narrow thermal neutron beam that can be aimed at
any target and;
2. A gamma ray detector to decipher the resultant gamma rays in order to
accurately detect the presence of explosives (see diagram below).

Fortunately, thermal neutron beams are capable of penetrating most substances
(including lead and steel). As a result, camouflaging or shielding an IED is not an
effective strategy for concealing its presence. Additional details about the
Company’s technology are available upon request.

IED on Light Pole
Thermal Neutron Beam
Vehicle-mounted
Gamma Rays Counter-IED System
IED

Explosively Formed
Azimuthally Scanning Penetrator (EFP)
Thermal Neutron Source

Narrow Band Gamma Detector Above-Ground IED

Below-Ground IED

SEDS’ Vehicle-mounted Counter-IED System



3. Industry Analysis and Trends

Background
Improvised Explosive Devices (IEDs), often referred to as “roadside bombs” by
the press, are essentially makeshift explosive devices. The most destructive IED
is known as an explosively formed projectile (EFP), capable of penetrating
virtually every known type of armor. Normally used in unconventional warfare
and terrorist-driven conflicts, IEDs are usually placed above, next to, or beneath
a road. Preferred targets include convoys and civilian SUVs, as insurgents
believe these transport government officials and intelligence agents. Fuel
tankers are also ideal targets as the flames and billowing smoke from a burning
fuel tanker makes for compelling television footage.

By definition, IEDs are inexpensive, simple to construct, and easy to use. Even
though it has the potential to destroy numerous lives and cause millions of
dollars in damage – the total cost of a typical IED may be less than $200. IED
triggering devices often consist of everyday items such as cell phones, garage
door openers, or radio-controlled toys. Some are as simple as driving over a
rubber hose to produce enough air pressure to activate a detonator. In the
present conflict in the Middle East, insurgents have made the IED the
centerpiece of their fight against coalition forces. As a result:

 IEDs have caused about half of all the U.S. combat casualties in Iraq, and
about 30% of all combat casualties in Afghanistan.

 IEDs are currently the number one killer of U.S. troops in Iraq and
Afghanistan. Worldwide, more than 21,000 U.S. troops have been killed
by IEDs.

 In the current conflict in Iraq, the number of IED attacks has doubled
each year. As of September 2007, IEDs have killed 1609 U.S. troops and
have wounded over 18,000. Many of those wounded will experience
devastating long-term consequences and lifelong suffering.

 In Iraq and Afghanistan, 60% of all IEDs explode before being found.
 The IED fatality count for citizens in Iraq is estimated to be ten times
greater than for U.S. troops.

 IEDs represent a global dilemma. Currently, 20 nations are threatened by
their escalating use.

IED use will not stop with the end of the conflict in Iraq nor will their use



diminish over time. Until there is a reliable method for detecting and defeating
them, IEDs will continue to be the weapon system of choice for insurgents, rebel
forces, guerrilla fighters, and terrorists. Meanwhile, the death toll, the
devastation, and the number of casualties will continue to mount. This is the
principal driving force behind the world-wide counter-IED effort.

Existing Counter-IED Measures
Existing “solutions” for disabling and locating IEDs are primarily limited to
vehicle-mounted jamming devices and the systematic detection of indicator
parameters or “correlates” of the explosive device.

Examples of existing vehicle-mounted electronic jamming systems include the
IED Countermeasures Equipment (ICE) and the Warlock. Both systems utilize
low-power radio frequency energy to block the signals of radio controlled
explosives initiators, such as cell phones, satellite phones, and long-range
cordless telephones. The detection of indicator parameters or “correlates” of the
explosive device typically include:

Casings – Normally found with World War II style metal detectors or earth-
penetrating radar. However, if an IED is uncased or buried deep enough, it is
nearly impossible to detect.

Vapors – Usually detected by manual swabbing, vapor sniffing devices,
trained canines, or short-range optical methods. Vapor detection is highly
problematic in a war environment where nuisance vapor signals and
explosive gasses are frequently present. Relying on vapors as a detection
method can also be highly dangerous given that personnel must be in close
proximity to the IED.

Emplacement Evidence – Identified by analyzing the physical and visual
characteristics of disturbed soil. Limited to subsurface IED placement,
emplacement evidence is easily concealed with rudimentary camouflaging
techniques.

Triggering Devices – Traditionally found with electronic scanning, high-
power microwaves, and other similar tactics. However, disabling triggering
devices is becoming more difficult over time due to the relentless
development of new triggering technologies.

The Counter-IED Industry
The official leader of the counter-IED effort in the U.S. is the Joint IED Defeat



Organization (JIEDDO). In July, 2004, the Pentagon established the JIEDDO to
oversee and streamline the numerous counter-IED programs that were being
conducted by virtually every branch of the military. Although the JIEDDO was
initially a U.S. Army task force, the Pentagon ultimately expanded the
organization’s operational and strategic influence. Specifically, in June 2005, the
Pentagon designated the Secretary of the Army as the JIEDDO's executive agent
and adopted a much broader organizational structure.

In addition to the JIEDDO, there are dozens of other governmental organizations
that are actively participating in the search for counter-IED solutions. The
following is a partial list of the governmental and quasi-governmental
organizations involved with counter-IED efforts in the U.S. The length of the list,
as well as the importance of its members, clearly reveals the gravity and
magnitude of the counter-IED effort.

Defense Advanced Research Army Cold Regions Research & Army Communications Electronics
Projects Agency Engineering Laboratory Command
Naval Research Laboratory Department of Homeland Security Electronic Systems Command
Office of Naval Research National Security Agency) Federal Bureau of Investigations
Army Research Laboratory Defense Intelligence Agency Air Force Research Laboratory
Joint Info. Operations Center National Reconnaissance Office Joint Warfare Analysis Center
Army Night Vision Laboratory Department of Energy Electronic Systems Command
MIT – Lincoln Laboratory Defense Threat Reduction Agency Special Operations Command
Los Alamos National Laboratory Department of State Asymmetric Warfare Group
Sandia National Laboratory Central Intelligence Agency Rapid Equipment Force
Pacific Northwest National Army Soldier and Biological FBI - Terrorist Explosive Device
Laboratory Chemical Command Analytical Center
Lawrence Livermore National Space & Naval Warfare Systems National Geospatial Intelligence
Laboratory Command Agency

In addition to governmental agencies and Federal laboratories – today’s
counter-IED industry consists of a varied collection of military R&D firms, niche
technology companies, and top-tier defense contractors.

According to sources in the Joint IED Defeat Organization, total funding for IED
countermeasures administered through the JIEDDO for 2005 was $1.34 billion.
In 2006, it was $3.49 billion. The 2007 Defense Appropriations bill, as approved
by the House and Senate conference committee, provides $1.9 billion in funding
for the JIEDDO. According to a GAO report, the JIEDDO has already received
more than $6 billion, and has managed to spend around 30% ($1.8 billion). The
agency operates out of a secure building in Crystal City, Virginia, about a mile
from the Pentagon. The JIEDDO employs approximately 360 people consisting of



military personnel, civilians, and outside contractors. Additionally, the JIEDDO
has teams working in Iraq, Afghanistan, and other military “hot-spots”. The
JIEDDO also serves as a funding agency for academic, industrial, and
government entities who submit proposals to the various boards for evaluation
and approval. Science and technology projects are also funded through the so-
called OXR agencies (AFOSR, ARO, ONR, DARPA, and the DoD).

Industry Trends
Despite its numerous members, vast resources, and technological diversity
– the counter-IED community has been largely ineffective in combating
IEDs. To date, the principal result has been a steady stream of impressive
new technologies that seem to do everything but actually stop IEDs. A
good example is the ubiquitous electronic jamming device. Used
extensively by the military, jamming devices initially appeared to be the
perfect solution for disabling the underlying circuits that detonate most
IEDs. However, in the real world, jammers have proven to be largely
inadequate given that insurgents switch methods rapidly when they learn
that existing detonation methods have been compromised

Furthermore, many countries (including Iraq and Afghanistan) have unmanaged
and unregulated Radio Frequency (RF) spectrums. As a result, sophisticated
counter-IED jamming devices often interfere with mission-critical radio
communications. For instance, when soldiers need to use their radios, they
often have to turn off their IED jamming devices. This invariably creates a
dangerous window of opportunity for alert IED operators. Similarly, counter-IED
jamming devices will sometimes lock onto other electronic combat systems in
the area – severely compromising their functionality and usefulness.

Nevertheless, there is presently a wide range of counter-IED technologies being
developed today including radar-based detection systems, X-ray equipment,
robotic explosive ordnance disposal equipment, physical security equipment,
and ancillary armor for vehicles and personnel. Other IED countermeasures
being explored include a system that can generate a pulse of high-power
electromagnetic energy to detonate an IED or destroy its internal circuitry. An
example is the Neutralizing Improvised Explosive Device with Radio Frequency
(NIRF). The system purportedly generates an extremely high-frequency field at a
very short range that is capable of neutralizing the IED’s internal circuitry. In
spite of these efforts, detection technologies, to date, have proven quite
disappointing, and no working system exists to reliably identify the presence of
IEDs from a safe (“standoff”) distance. Here are some other key issues that are
currently defining and shaping the counter-IED effort:



 The U.S. Government has appropriated $12 billion to find a solution to
IEDs. Roughly one quarter of that has been spent to date, mostly on
armor and electronic jamming systems.

 The counter-IED market is expected to grow by about 12% CAGR from
2008 to 2012. Unused IED Expenditures will decline by 21% CAGR during
the same period.

 Total counter-IED market over the period 2008–2012 will be $23.2
billion with an outlay of $28.5 billion.

 The international market for counter-IED technology is expected to grow
from $5.3 billion in 2008 to $6.3 billion in 2012.

 Detection technologies to date have proven quite disappointing, and no
working system exists to find IEDs from a safe (“standoff”) distance.

 The civilian populations in conflict zones (e.g., Iraq and Afghanistan)
remain largely without any protection from IEDs.

Sources:
 SEDS Internal Documentation

 ‘Global Counter IED Markets and Technologies Forecast 2008 – 2012’
Homeland Security Research Corporation

 ‘Congressional Research Service Report for Congress’
September 25, 2006 by Clay Wilson



4. Target Market

Market Description
The principal U.S. market for manufactured counter-IED solutions is the U.S.
Department of Defense (DoD) and the various branches of the U.S. military. In
2004, the DoD created the Joint IED Defeat Organization (JIEDDO) to assess and
identify effective IED countermeasures. To help achieve its goals, potential
countermeasures are frequently tested at the U.S. Army’s National Training
Center at Fort Irwin, California. The technologies being evaluated typically
include electronic jammers, radars, X-ray equipment, robotic explosive
ordnance disposal equipment, physical security equipment, and armor for
vehicles and personnel

The Department of Defense’s actual process of purchasing counter-IED
solutions is often complex and obscure. One reason is that IED countermeasure
equipment funding has traditionally come through congressional plus-ups and
fiscal reprogramming actions – not through ordinary line-item funding in the
annual budget. For example, on May 24, 2005, Congress approved a transfer of
$129.7 million from the Iraqi Freedom Fund to purchase mobile jammers. On
July 13, 2005, a reprogramming action transferred $10 million from the Iraqi
Freedom Fund for two new anti-IED systems: $3.5 million for 50 modular
electronic protection systems and $6.5 million to purchase 187 expendable
robots for explosive ordnance disposal. From 2004 to 2006, approximately $6.1
billion has reportedly been spent on U.S. efforts to defeat the threat from IEDs.

Market Size and Trends
The total counter-IED market over the next five years is expected to reach $23.2
billion with an outlay of approximately $28.5 billion. The market is expected to
grow by approximately 12% CAGR over the same period. Meanwhile, unused
counter-IED expenditure will decline by 21% CAGR during the same five year
period.

One interesting trend is a recent effort to streamline the DOD’s technology
acquisition process. The impetus may have been a recent GAO report indicating
that acquisition delays may have increased the vulnerability of U.S. forces to the
IED threat. Actions taken by the DoD to minimize future acquisition delays
include implementing a “Rapid Fielding Initiative” (RFI) to ensure that soldiers
have the latest available equipment. The RFI has reportedly reduced some
acquisition cycles to weeks or even days. Similarly, in April, 2005, the Army was



granted “rapid acquisition authority” by Defense Secretary Donald Rumsfeld.
This meant that the traditional D0D acquisition process could be set aside in
some cases. In one instance, a manufacturer of a portable IED jamming device
was selected in only 2 weeks. Other key market-related findings and factors
include:

 The total counter-IED market between 2008 and 2012 will be
approximately $23.2 billion with an outlay of $28.5 billion. Counter-IED
outlay levels will remain stable during the next few years. As of 2010,
counter- IED outlay will largely depend on the evolution of conflicts
around the world along with the ability of the JIEDDO to achieve some
significant progress in countering IED threats.

 Counter-IED investments will grow steadily in India, China, and South
America, with funding focusing foremost on defeating IEDs directly (as
opposed to preventing their overall use). Compared with the American
outlay, funding in these regions is apt to be relatively modest.

 Outlay focus in Western Europe and the U.S. will likely be on R&D,
advanced jamming systems, and standoff detection systems. Growth will
be much more pronounced in Europe, since the current outlay is much
smaller than that of the U.S.



5. Competition

The Current Picture
From virtually any perspective, the counter-IED industry appears extremely
competitive. At the present time, dozens of companies and organizations
worldwide are working on the IED problem. In one day during a recent industry
event, the JIEDDO received more than 800 counter-IED project proposals.
Furthermore, since the Joint Experimental Research Complex in Yuma Proving
Ground, Arizona, was constructed, nearly 400 counter-IED systems have been
tested.

Yet in spite of the widespread effort and extensive commitment – no one has
been able to develop an effective and reliable method for detecting and
disabling IEDs. Nevertheless, there are presently hundreds of military R&D firms,
niche technology companies, and top-tier defense contractors searching for a
solution. Traditionally, the U.S. military tends to rely on a select group of
defense contractors for most of their products and services. These include:

 Lockheed Martin
 Boeing
 Northrop Grumman
 General Dynamics
 BAE Systems
 Foster Miller (and subsidiaries)
 L3 Communications (and subsidiaries)
 Raytheon

All of these companies are heavily invested in the search for a viable counter-
IED solution. Likewise, every element of the U.S. military is currently engaged in
counter-IED efforts, from satellites, through UAVs, intelligence, infantry and
armored units. Yet in spite of these efforts, detection technologies to date have
proven to be technically inadequate and functionally unacceptable. As a result,
no working system exists today that is capable of finding IEDs from a safe
(“standoff”) distance. In the meantime, the counter-IED market is beginning to
shift away from immediate, tactical solutions (i.e. jammers and armored trucks)
to technologies and systems that take a broader perspective of the problem and
the ways to counter it. Put another way, the counter-IED market is beginning to
evolve and mature.



Barriers to Competition
While the counter-IED market has a number of attractive qualities, there are a
number of potential growth inhibitors that must be carefully considered. At the
top of the list is the perceived inability of the U.S. to mount an effective
counter-IED effort despite huge investments. The predictable result is a growing
sense of doubt and uncertainty within the stakeholder community. Other
potentially significant inhibitors include:

 Counter-IED authorities, both in the U.S. and in the U.K. complain that
most companies do not take into consideration all of the issues before
approaching the government with proposals. The specific source of this
sentiment is unclear but it does indicate the need for improved
communications among the various stakeholders.

 The lack of sufficient security clearances tends to prevent many in
private industry from understanding the precise nature of the problem
that the government wants to solve.

 According the GAO, the JIEDDO had managed to use only a quarter of its
budget. Some believe that this demonstrates an acute shortage of
administrative capabilities compared with the substantial funds allocated
to the counter-IED effort.

 The secrecy surrounding counter-IED efforts is largely designed to
provide an element of surprise against insurgents. However, it has also
served to prevent potential stakeholders from sharing crucial
information, exchanging ideas, and combining forces.

 JIEDDO sings its own praises as a skilled user of small and big industry
players. In practice, they still tend to work with the “traditional” top-tier
defense contractors. In that sense, they are not different from any other
DOD operation. As a practical matter, this means that small companies
may have to ultimately rely on strategic partnerships, political alliances,
and well-connected consultants.

 In some regions of the world, there is a pervasive sense of vulnerability
and hopelessness regarding the IED phenomenon (particularly in
Europe). This could potentially impact counter-IED funding in these
areas.

 There is the mistaken belief, in some political and counter-insurgency
circles, that the IED threat is a passing phenomenon that will eventually
dissipate with the resolution of the conflicts in Iraq and Afghanistan.



6. Strategic Position and Risk Assessment

Company Strengths
SEDS’ approach with the Sauron System entails the contemporary application of
a proven core technology (TNAA) to detect nitrogen-containing IEDs from a
standoff distance. To succeed as a counter-IED system, the Sauron System will
have to be coupled with a complementary technology that is capable of
disabling or destroying the IED, once it has been identified. The ramifications of
this dependence are unknown at this time but it does suggest that the Sauron
System will most likely be coupled with other counter-IED solutions before it
can be delivered as a complete solution.

This component-based design provides SEDS with a key advantage over other
single, tactical solution vendors. Specifically, the Sauron System will be able to
take advantage of a wide array of IED-disabling technologies. This inherent
ability to operate with numerous solutions provides the Company (and its
partners) with a level of flexibility that may be crucial over the long run. This
modular design also is consistent with the current technological shift from a
‘single solution’ mode to an integrated, multi-solution platform. It is also
compatible with an industry that is presently realigning the solution delivery
capabilities of major defense players by a series of mergers and acquisitions.

Since the Company’s inception, it has pursued a number of core
intellectual property objectives using internal investment, and has
vigorously pursued patents on this technology. This approach was
specifically designed to establish a sole source for the Company in future
customer-funded product development contracts, as well as create barriers
to potential competition. Specifically, the Company’s patent applications,
in conjunction with its significant proprietary knowledge, will be used as a
justification for sole source contracts in accordance with Federal
Acquisition Regulations, and thereby could serve to reduce the likelihood
of competitive solicitations.

Presently, 75 patent applications are pending. X of the 75 pending patent
applications have received Government initiated "national security related"
secrecy orders. The U.S. patent office imposes secrecy orders when the
disclosure of an invention by publication of a patent would be detrimental to the
United States’ National Security



Market Opportunities
The counter-IED effort undoubtedly represents one of the most unique and
potentially rewarding business opportunities ever seen in the military R&D
sector. In addition to saving lives and reducing injuries – successful counter-IED
solutions could literally shift the balance of power throughout much of the
world. Accordingly, there are now billions of dollars available for the
development and production of effective counter-IED solutions. Furthermore,
dozens of governmental agencies and scientific institutions are fully prepared to
lend their significant support and vast resources to any company that is able to
develop a viable solution to this deadly problem. These are some of the key
findings and factors that will impact any company wishing to succeed in this
unique business setting:

 The potential reduction in casualties and the high cost of replacing
personnel and equipment represents a major return on investment for
counter-IED funding efforts. This is one of the major reasons why there
is so much financial support available.

 Small companies with promising technologies (in the standoff threat
detection arena) will enjoy a significant level of attention from a wide
range of interested parties and counter-IED stakeholders.

 The probability of developing a single “silver bullet” solution to the IED
predicament is extremely improbable. Accordingly, successful counter-
IED solutions are apt to be the result of collaborative development
strategies. As a result, small companies with specialized technologies
will have a much easier time leveraging their R&D investment dollars.

 Current counter-IED technologies and tactics do not provide more than
a partial, temporary solution. This means that opportunities for success
are greater than ever.

 Given its significant impact, the IED threat is likely to expand from Iraq,
Afghanistan, and the Middle East to the U.S., Western Europe, and other
countries. As a result, counter-IED efforts and budgets are here to stay.

 There is now an increased perception in much of the radical Muslim
world that IEDs (including suicide bombers) are a suitable “response” to
Western “aggressiveness.” Consequently, a much higher share of military
budgets will be allocated to counter-IED systems over the next decade.

 Reduction in the size of the conflicts in Iraq and Afghanistan will not
necessarily bring about a proportional reduction in IED threats. In fact,
the result may be the opposite as ‘unemployed’ IED experts take their
skills to other countries.



Risk Assessment
In spite of the numerous opportunities and extraordinary rewards, the counter-
IED market is clearly one of the most competitive business environments in the
world. While the JIEDDO has done an exceptional job in the promotion of its
mandate, it has a well-earned reputation for preferring to work with top-tier
defense contractors. For small companies like SEDS, this predilection may
ultimately necessitate the need for a strategic alliance with an established
defense company. However, in the long run, this may enable the Company to
enjoy a wide array of unexpected tactical business advantages.

In spite of the unprecedented effort and vast resources that have gone into
solving the IED detection problem, no one has been able to come up with a
viable technology-driven solution to date. This underscores the inherent
difficulty in fighting improvised and rapidly evolving weapons used by
ideologically driven insurgents. So far, IED designers and operators have
demonstrated an uncanny ability to stay one step ahead of the military’s
technological progress. As a result, any developed solution will have to be
inherently resistant to technical and strategic oversights and work-
arounds.

While each of these risk factors may pose a significant challenge to SEDS, they
are inherently indiscriminatory, and thus will impact practically any company
involved in the development of counter-IED solutions. In addition, small
companies seem to have a knack for competing aggressively and successfully in
the technology sector. The counter-IED industry, in spite of its size, may not be
the exception.



7. Marketing Plan and Sales Strategy
Because the process of selling to the Department of Defense is often complex,
the Company has developed several contacts within the military and in the U.S.
Congress. Likewise, the Company also uses a number of large lobbying firms in
Washington, DC. In addition, the Pentagon’s JIEDDO has set up several
specialized programs to help streamline and expedite the process of bringing
viable counter-IED solutions to market. These are just a few:

 Twice a year, the JIEDDO holds a day of meetings and sessions with
industry representatives. The next JIEDDO industry day is set for April
2008 in the Western United States. The specific location is not yet
settled.

 The JIEDDO has admittedly had a difficult time keeping track of
proposals. As a result, the organization now allows companies to submit
proposals online. Taking the process online has enabled the JIEDDO to
establish a consistent format while simplifying the distribution and
review process. Although JIEDDO officials are still working out the kinks,
it has improved the evaluation process.

 The JIEDDO frequently asks for feedback on certain promising kinds of
counter-IED devices. SEDS plans to submit comments when the
opportunity arises.

 The JIEDDO plans to develop guidelines for small companies that have
viable counter-IED solutions. While this program isn’t yet complete, it
should help companies to save time and conserve resources.



8. Management and Organization
Like most technology start-ups, SEDS plans to initially maintain a managerial
structure that stresses product R&D. At the same time, the Company has begun
developing a formal business structure to handle its administrative, financial,
and business development requirements. As the Company achieves its key
objectives, it expects to shift the managerial emphasis from R&D to
manufacturing and business development. Presently, the Company is actively
developing the professional ties, organizational structure, and operational
discipline it needs to ensure that its technology is thoroughly tested, carefully
evaluated, and is in accordance with the specific requirements of the Joint IED
Defeat Organization. The current team members include:

 BOSSgov Team and Consultants

 Martin Tibbitts – Chairman
 Wayne B. Norris – Principal Investigator
 Dr. Ken Ricci, Ph.D. – Consulting nuclear physicist (subcontracted
from LaunchPoint Technologies)
 Dr. Nathan Bramall. Ph.D. – Consulting nuclear physicist and data
acquisition/device driver software consultant
 Greg Pepus – Consultant

 Oak Ridge National Laboratories Staff

 Dr. Chuck Alexander, Ph.D. – Senior Scientist, Californium User
Facility for Neutron Science

Each team member’s background and qualifications are currently being written.

Operations
In October, 2007, SEDS opened its lab in California to start building the Sauron
System prototype. Need some details about the facility.

Personnel Plan
To support its counter-IED initiative, SEDS plans to first hire N new employees.
As further funding is secured, additional employees will be brought into the
company. The following table shows the Company’s anticipated hiring schedule
for 2008-2009:



Month
Personnel 1 2 3 4 5 6 7 8 9 10 11 12
Position n n n n n n n n n n n n
Total
Personnel N N N N N N N N N N N N



9. Development, Milestones, and Exit Plan
SEDS long-term goal is to pursue opportunities to design, manufacture, and
support counter-IED systems and derivatives for U.S. and allied military forces
as well as non-governmental security customers. Because SEDS plans to develop
additional innovations, they anticipate that additional product variations may be
utilized on other military platforms in the future as customers identify new ways
to implement the Company’s technology.

The Company also expects that the successful deployment of their counter-IED
technology will create additional opportunities for the follow-on development
and production of derivative systems for other U.S. and allied military forces.
Based on feed-back from interested parties, the Company plans to develop
packaged kits and "palletized" versions of its counter-IED technology. These
palletized systems are designed for rapid integration into existing combat-
ready vehicles or other platforms supplied by the customer.

Developmental Timeframe
In 2006, BOSSgov applied for a comprehensive 75-claim patent to protect its
unique design and underlying technology. In March 2007, the SEDS team
completed a series of successful preliminary lab experiments at the Department
of Defense’s Oak Ridge National Laboratories. The Company has also devised
numerous design items using industry-standard simulation codes.

SEDS seeks $3.3 million in first-round funding to create a demonstrable
prototype (the Sauron System). Once it has produced its prototype, SEDS expects
to secure JIEDDO funds to produce the first production unit. In September, they
visited JIEDDO (the Joint IED Defeat Organization) to present their preliminary
findings. The response from JIEDDO was exceptionally positive and very
encouraging. In October 2007, SEDS opened its lab in California to begin
building the prototype. The Company’s developmental timeframe and
associated costs are shown in the following table:

Developmental Stage Duration Anticipated Cost
Proof of Concept 120 days $800,000
Prototype (Sauron System) 180 days $2.5 million
Production Unit 240 days $5 million

SEDS believes that it can build a preliminary prototype within 6 months and a
first production unit within 20 months. The estimated target price for each



system is projected to be approximately $1 million with a 40% gross profit
margin. In addition, ancillary sources of revenue including system maintenance,
upgrades, training, and customization, are expected to increase revenues by as
much as 100% to 300%. Expected sales for the next 5 years are shown below:

Year 2008 2009 2010 2011 2012
Units Sold* 2 10 25 40 75
Price per Unit $1.5 million $1.5 million $1.25 million $1.0 million $0.75 million
Gross Revenue $3.0 million $15 million $3.25 million $40 million $56.25 million
Gross Margin $1.2 million $6.0 million $12.5 million $16 million $22.5 million
Net Profit $0.6 million $3.0 million $6.25 million $8.0 million $11.25 million

* 2008 units will be pre-commercial prototypes

Milestones
 2005-06 – BOSSgov (SEDS’ parent company) theorizes an IED-detection
system based on proven technology and applies for a 75-claim patent.

 March, 2007 – BOSSgov performs successful preliminary lab
experiments at the Department of Defense’s (DOE) Oak Ridge National
Laboratories.

 September, 2007 – The SEDS team visits JIEDD and receives
encouraging response and positive feedback.

 October, 2007 – SEDS opens its lab in California to start building the
prototype.

 Month, 2008 – SEDS completes the laboratory prototype to determine
the feasibility of the product, and to generate technical and operational
data.

 Month, 2008 – SEDS completes the field-ready prototype (the Sauron
System) to generate technical and operational production data.

 Month, 2009 – SEDS completes the first production version.

Exit Strategy
Once SEDS has completed a successful prototype, they will have several options
for moving forward. These include:

 Selling the Company to a major defense player

 Selling or licensing the technology to a major defense player.



 Partnering with a major defense player.

 Securing contracts with the government and begin producing customer-
funded systems.


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